Dangote Petroleum Refinery & Petrochemicals has continued to shield the Nigerian market from external price shocks by maintaining relatively stable domestic fuel prices despite rising international gasoline prices and increasing freight costs, according to S&P Global Commodity Insights. The global rating agency disclosed this in its latest market intelligence report, noting that fuel importers supplying the Nigerian market are becoming increasingly concerned over the sharp rise in international gasoline prices driven by higher global product values and shipping costs. The report comes amid concerns by some Nigerian stakeholders over Dangote Refinery’s recent decision to begin selling refined petroleum products in United States dollars. What they are saying
S&P Global said market participants believe Dangote Refinery’s pricing has effectively capped domestic gasoline prices, making it difficult for importers to transfer higher international costs to Nigerian consumers. Market participants told S&P that gasoline prices in Nigeria are effectively being “capped by Dangote prices”, limiting the ability of importers to pass on higher international costs to the domestic market. “Lomé values have risen above Dangote sales prices, which has shut the arbitrage,” a trader was quoted as saying, noting that importing fuel into Nigeria has become increasingly uneconomic under current market conditions. According to S&P Global, the cost of transporting clean petroleum products from Northwest Europe to West Africa has increased from US$29.70 per metric tonne at the end of June to US$37.12 per metric tonne as vessels reposition to serve alternative markets.
The report also noted that diesel markets have tightened following reduced supplies of Russian Black Sea cargoes, resulting in higher prices for high-sulphur gasoil across West Africa and further increasing the cost of fuel imports. More insight
Despite mounting global cost pressures, Dangote Petroleum Refinery has continued to moderate domestic fuel prices while maintaining that its pricing reflects actual crude procurement costs rather than daily movements in international oil prices. Since the end of May, the refinery has reduced the ex-depot price of Premium Motor Spirit (PMS) by more than N200 per litre, Automotive Gas Oil (AGO) by N300 per litre and Jet A1 aviation fuel by N520 per litre.
The refinery has consistently stated that crude oil is procured weeks or months before refining under commercial contracts linked to monthly average pricing mechanisms rather than prevailing spot market prices. S&P’s assessment suggests that without Dangote Refinery’s domestic supply, Nigeria’s reliance on imported fuel would likely have resulted in significantly higher pump prices as importers grapple with rising international product prices and freight costs. Analysts also noted that Dangote Refinery is increasingly emerging as the regional pricing benchmark, with importers finding it difficult to compete whenever international replacement costs exceed the refinery’s domestic prices.
What you should know
Dangote Petroleum Refinery recently ended naira-denominated pricing for petroleum products, introducing a dollar-based pricing framework for refined products. The refinery announced that petrol, diesel and aviation fuel would henceforth be sold in United States dollars, with petrol priced at $0.779 per litre. At the prevailing official exchange rate of N1,380.50 to one US dollar, the benchmark translates to approximately N1,075.61 per litre. Unlike the previous fixed naira pricing system, the ex-depot price of petroleum products in naira will now fluctuate in line with movements in the foreign exchange market. The latest pricing framework has intensified calls by some industry stakeholders for the revival of government-owned refineries to improve competition, expand domestic refining capacity and reduce Nigeria’s exposure to foreign exchange volatility in the downstream petroleum sector.
